Matthew Bishop is the US Business Editor New York Bureau Chief of The Economist and co-author of Philanthrocapitalism: How Giving Can Save the World. Before joining The Economist, Mr. Bishop was on the faculty of London Business School.
Bishop and co-author Michael Green describe philanthrocapitalism as a “new way of doing philanthropy, which mirrors the way that business is done in the for-profit capitalist world. Entrepreneurs don’t just want to write cheques. They want to be hands on, bringing innovative ideas to scale by investing their time and energy.” At a macro level, they argue, philanthrocapitalism explains how “capitalism itself can be philanthropic, working for the good of mankind.”
What has changed since you wrote Philanthocapitalism in 2008, in this post-crisis era? Even without the crisis, there would have been many changes in four years because this current generation of the Philanthrocapitalism movement is very new. Entrepreneurs getting into philanthropy tend to they make a lot of mistakes early on, so there’s lots of learning and evolution. The crisis has accelerated that change. Moving from a sense of abundance to a sense of scarcity has made everyone focus much more on “How do we achieve the maximum impact we can from our money?” In some cases there was a stepping back. People lost a lot of money and realized “Things are more volatile than we thought.” For the most part the people we wrote about have continued with their philanthropy and I think, have instead accelerated their asking of tough questions, of their making hard decision about which organizations to prioritize and so forth.
Do you believe philanthrocapitalists are more likely to learn from their mistakes than the traditional players? Yes. Firstly, the people who create wealth tend to be much more willing to take risks because it’s their money. I think for people who run established foundations where the wealth creator isn’t around, taking risks feels more difficult. Secondly, I think a lot of philanthrocapitalists are entrepreneurs. Certainly if you grow up as an entrepreneur in America, part of your rite of passage is to have a couple of failures and you want to talk about that. You’re not getting that story as much in philanthropy. Foundations give lip service to the idea that their philanthropy is about taking risks and about failing, but there isn’t that same enthusiasm about talking about what went wrong that there is in the entrepreneurial world. It’s a real shame because one of the reasons so many companies have become so much more efficient and productive over the last twenty-five years has been the degree of transparency, the degree of learning that’s come from mistakes. Philanthropy still feels so opaque, so reluctant to talk honestly about things that have been tried and failed. There’s a lot of reinventing the wheel, of repeating the cycle of failure and new ideas not getting the funding they ought to be getting because the money is still tied up in old stuff that should have been put out of its misery.
What else is different in 2012? The funding crisis in the government and the nonprofit sectors has increased the need for the philanthrocapitalist. There may be a greater willingness to partner and to go along with some of the philanthrocapitalists’ ideas from these sectors which have traditionally been quite hostile.
At the same time the social context has changed. We ended the book with a long discussion of “what’s the social contract going to be?” We wanted the philanthrocapitalists to address the fact that if they really want to play an active role in solving problems, they have to build consent with the people. There’s been more effort to do that recently. One result has been the funding of mass philanthropy initiatives like KIVA, Donors Choose, Charity Water and so forth, which take partnerships between the wealthy and the rest of us to a new level. These groups are engaging in more advocacy and community building and are giving regular people an opportunity to get feedback, to actually see where their money’s going, all of those things that people who have more money to give can often get from their relationships. So there’s been some democratization of philanthropy.
Yet at the same time, because of the central role of Wall Street and the rich in the crisis, there’s a sense that some of the Wall Street philanthropy that we held up as a model in the book is no longer adequate. Take Goldman Sachs, for example, whom we talk about very positively in the book, because of its culture of philanthropy. In the last five years Goldman launched the 10,000 women and the 10,000 small businesses initiatives and a big corporate giving fund. But the whole question of the legitimacy of finance has moved to higher order. There is now a basic question about whether these institutions, such as Goldman Sachs, are fulfilling a social purpose that we feel is valuable. One of the challenges that the Philanthrocapitalists face, particularly those who come out of the financial sector, is having this debate about the social contract, about what is expected of the rich. Is philanthropy going to be adequate and done on the scale and to a degree of effectiveness that is able to meet the public’s appetite to feel good about the system again? I think that’s a much more open question than it was five years ago.
Do you see any bright spots? I see a lot of positive change in the Gates Foundation led effort on malaria. This is the first really big global campaign based on the principles of Philanthrocapitalism. It has brought together everyone from churches to big companies like Exxon Mobil to African governments to mass movements like ONE, to the World Bank to foundation and has already produced a dramatic decline in deaths from malaria. It’s proof of the model; we’re starting to get results.
Companies, big companies, like Coca Cola, Unilever and so forth are also understanding their social context a lot better. As they look to grow in the developing world, in particular, so there’s much more of a drive to be “on the right side of progress”, to helping progress along as part of their corporate strategy, rather than pushing it off to their foundation. Corporate philanthropy is becoming bigger than just a pot of money that is thrown away or thrown at countries. It’s becoming much more embedded in the heart of what companies do.
In the past you’ve lamented the lack of continuity in corporate philanthropy. Is that changing? Historically a new CEO would come in, they’d get a new advertising agency and they would change the giving strategy as well. Now I think there’s more of an understanding, though it’s by no means gone the whole way, that corporations have to embed this work in their long-term business strategies. Staying the course is better for everyone concerned.
The fact that Apple is now attracting attention for its labor practices is also an interesting and positive development. Over the last 20 years supply chain issues have driven a lot of the best thinking in the companies that have been forced to address them. For example, Nike and The Gap‘s partnerships with NGOS. But there’s still got a long way to go. Now that Apple is on the firing line and its brand is so important that Apple may well emerge as the new poster child, either for doing it right or not doing it right. But I think the logic of the risk to their brand means they will do a lot of good now.
A third area that’s changing is the growing role of social media. Companies are starting to learn more about how to build mass movements for social change, for social problem solving. It’s still very early days, but whether it’s aspects of the Arab Spring or the Kony video, for all of its flaws, the rise of KIVA, of Donor’s Choose, Water, Avaaz, or Purpose, there’s a load of really interesting stuff going on. The consequences will be more empowered people and philanthrocapitalists are playing quite an important role in funding this type of work, although it may be below the radar.
Finally, there is greater attention being paid to the political consequences of the rich getting engaged in society, whether it’s the Koch Brothers or George Soros or whoever. It’s not clear how the public is going to feel about that over the medium term, whether it’s done on a sufficiently transparent basis and so forth. This is coinciding with a growing recognition from the philanthrocapitalists that part of their success will depend on their ability to get government to change policy. So not only is business flexing its muscle in a way that can be seen as narrowly self interested and against the popular will, but philanthropists are also treading into the same space. They are apparently doing it for good reasons, but they risk becoming more politically controversial. At the moment nonprofits and philanthropists seem to have high public trust compared to business, newspapers and politicians, but if they get more and more in the political debate, will that change? will that actually call into question their legitimacy?
Bill Gates was in Spain recently to encourage the government to maintain its international development spending. What is the leverage of someone like Bill Gates? He clearly has status. People will listen to him. He can get access to anyone he wants to meet. But the access comes at a price. I think that politicians like David Cameron in Britain, who have stuck to their aid commitment, are getting praised by Gates. That probably has a political value. On the other hand, the Italian government was criticized by Gates over its failure to maintain aid commitments and I don’t think that was the reason that Berlusconi left office!
What Gates is doing reflects the fact that even a massive foundation like Gates Foundation, the biggest foundation every created, can not move the needle on an issue so unless it can get government funding on board. Gates has to get involved in the messiness of politics. That’s a risky business because it means you have to tread the line of when do you criticize or praise a government and that can that come back to haunt you.
You talk about a HIV prevention campaign by Nike that was more far effective than government efforts. How could that be?The South African government came to Nike and said you’re more trusted than we are on this issue, could you make some adverts? And Nike, of course, did them very well. Government is not well trusted anywhere in the world at this moment and well run companies (although some have been badly damaged by the financial crisis) particularly consumer brands, devote a lot of energy to building close ties of trust with their customers.
In months ago George Overholser talked about Social Impact Bonds’ potential to guide governments toward more effective programs while taking less risk. We’re talking about them here in Spain. Is there value there? Social Impact Bonds could be transformational. Bringing the creativity of the private sector and the charitable sector into the heart of government in a way that bypasses some of the typical inertia is very promising. The problem is that these Social Impact Bonds are all different. They need to standardize them. But it’s exciting that it’s not just Britain, but also America and Australia and a number of other places. There’s real potential.